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Dictionary Of Commonly Used Terms

Advisor Research Technology - (ART) refers to the software technology that aids the advisors with daily asset allocation decisions. The software tool is an investment price analysis system that is approved for investment professional use only. It does not predict market movement, it only serves to observe current price movement and lend insight into current trends. It helps an advisor identify current market information that may otherwise go undetected.

Scofield Investment Technologies, LLC - (SIT) the entity that conducts independent research on Mutual Funds, Variable Annuities and Variable Life Sub-Accounts and Exchange Traded Funds (ETFs). This entity is a Limited Liability Company and provides investment research to Investment Professionals through Scofield & Company, LLC. Neither SIT nor Scofield & Company consult with Investment Professionals on the specific and individual needs, risk tolerances and objectives of any clients of third party advisors. Suitability information is to be determined at the sole discretion of the Investment Advisor utilizing the investment signals. While great time, effort, energy and care are poured into each model, not every model constructed is suitable for all clients. Suitability is of utmost importance when making a model recommendation, which is why a higher fee should be charged by the Advisor to evaluate and examine each client situation. The evaluation should be consistent, continuous and ongoing throughout the management process.

Scofield & Company, LLC - is a registered investment advisor that oversees the distribution of model technology to other direct entities, often times Investment Advisor Companies. Scofield & Company, LLC has been in business since 1986 and services a book of clients in the greater Akron, OH area. Since the start of distribution of research to other investment Advisors, Scofield & Company, LLC has discontinued its marketing to public customers.

Alpha - A coefficient measuring the risk-adjusted performance, considering the risk due to the specific security rather than the overall market. A large alpha indicates that the investment has performed better than would be predicted given its other peer group members and sector indexes.

Asset Classes - A type of investment, such as stocks, bonds, real estate, or cash.

Basic Risk Rankings - the quantifiable likelihood of loss or less-than-expected returns. Examples: Alpha, Beta, Best Return, Worst Return, Average Annual Return, Sector Risk, Investment style.

Benchmarks - A standard, used for comparison.

Beta -A quantitative measure of the volatility of a given investment relative to the overall market, usually the S&P 500. Specifically, the performance the investment has experienced in the last 5 years as the S&P moved 1% up or down. A beta above 1 is more volatile than the overall market, while a beta below 1 is less volatile.

Bottom-up - An investment strategy in which companies are considered based simply on their own merit, without regard for the sectors they are part of or the current economic conditions. A person following this strategy will be looking very closely at the company's management, history, business model, growth prospects and other company characteristics: he or she will not be considering general industry and economic trends and then extrapolating them to the specific company. Followers of this strategy believe that some companies are superior to their peer groups, and will therefore outperform regardless of industry and economic circumstances. The purpose of bottom-up investing is to identify such companies.

Conservative Growth - Cautious; having a risk-averse investment strategy which has preservation of capital as a high priority, but also contains growth elements that can participate in market appreciation. All of our investment models contain market related risk. Investors can and will lose principal value if the underlining investments purchased reduce in value. Conservative models typically have more bond positions and traditional investments that are broad or balanced in nature.

Core Growth - An investment composition that usually expresses high alpha and is often a high-quality security with a history of fairly steady performance. Core models are used to create diversification in a portfolio and act as a stabilizing force when markets are volatile. Positions in the core models are intended to anchor a portfolio and bring value, but all of our investment models contain market related risk. Investors can and will lose principal value if the underlining investments purchased reduce in value.

Direct Entities - is an entity that has directly contracted with Scofield & Company, LLC to supply ongoing investment research and buy/sell signals that are designed to enhance the Advisors ability to make informed decisions on a daily basis. For research and consistent support services, the Advisor pays Scofield & Company, LLC a fee that can be as high as 75 basis points per year. This fee is paid by the advisor and is not a separate fee paid by the end client. The managing advisor’s annual fee to the client encompasses any fee issued to the advisor by Scofield & Company, LLC.

Drawdown - reduction in account equity from a trade or series of trades. Drawdown is an important measurement of an investment style. A portfolio that displays a drawdown of 20 percent is a good indicator of the kind of volatility that the management style has encountered in the past. Investors that could not sustain a 20 percent drop in their account value might not want to use that kind of investment style for their portfolio. However, drawdown is only a record of past performance and has no bearing and is NOT a limiting factor on future investment volatility. A portfolio that displayed a drawdown of 10 percent could conceivably experience a 20 + percent drop. In this example, the drawdown statistic just indicates that 10 percent is the most it has dropped given the model composition and time measurements.

Dynamic Investment Style - asset allocations determined with the aid of computer models that select or weigh investments based on those categories with the greatest potential for superior returns, given current market conditions. The asset allocations become dynamic by changing in response to market conditions and perceived opportunities for profit. Not all trades are profitable.

Growth - An investment style that looks for any and all possible ways for capital appreciation. While growth models still contain elements such as bonds as a potential choice, most positions offered in these models display the highest risk/reward characteristics. It is conceivable that positions in these models could experience wild price fluctuations. Sectors such as energy, gold, technology and other aggressive items often provide the highest levels of volatility. Investors can and will lose principal value if the underlining investments purchased reduce in value. Growth models are often used for individuals that are looking to aggressively grow investment funds for time periods of longer than 10 years.

Indexes - A statistical indicator providing a representation of the value of the securities which constitute it. Indices often serve as barometers for a given market or industry and serve as benchmarks against which financial or economic performance is measured.

Investment Groups - a group of Mutual Funds, Annuity Sub-Accounts or Exchange Traded Funds that have been fundamentally evaluated and selected for specific characteristics. Characteristics can be based on many things including, but not limited to: sector correlation, price behavior, correlation to other investments in the group, etc. Investment groups often consist of 5 to 35 individual positions. However, at any given time the model will only select one investment position after having measured and calculated the best probability of making a successful transaction.

Investment Platforms - is the custodian company that is offering the trading solution on your account. Examples are: Fidelity, Oppenheimer, American Skandia, Nationwide, Datalynx. All of these companies have individual investment platforms that carry investment options that are limited by their specific internal controls. We evaluate each entity and determine if their internal procedures would allow for us to construct investment models that will help investment Advisors allocate assets with in their programs.

Market Capitalization - The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Also called market cap.

Minimum Holding Period - the length of time that a model must hold an investment position once purchased. Typical holding periods are 60 to 135 days per model. The difference in holding period per model is based on the underlining investment grouping that comprises the model. Bonds and lower volatility investments typically have a longer holding period that technology and higher volatility positions. Once a model has completed its minimum holding period, it evaluates the market price data everyday and will either sell the position if there is a stronger place to put the assets or continue to hold that position if the current position is still showing strength.

Model - A group of investments that have been fundamentally evaluated and selected for specific characteristics and are then studied by overlaying computerized technology to evaluate additional characteristics that helps to establish a minimum holding period. The minimum hold period is then tested over a number of different market time frames and economic environments to determine if the model has a robust nature that evidences a strong potential that might indicate an ability to continue to make positive transactions in the future. However, no amount of testing can assure a positive outcome. A model will only select one investment choice at a time. Historical indicators do not have to be 100% positive in order for a model to be issued to the model inventory. Actually, it's extremely rare to find a model that has displayed 100% productivity.

Moderate Growth - An investment style that looks for positions with medium risk statistics, but has demonstrated strong earnings and/or revenue growth or growth potential. Items in this category typically display a higher level of volatility than Conservative and Core. All of our investment models contain market related risk. Investors can and will lose principal value if the underlining investments purchased reduce in value. Moderate models are often used for individuals that are looking to grow investment funds for time periods longer than 5 years.

Objective - The result desired by an investor, such as current income or capital appreciation.

Overlap - is the term used to describe concentration into one area or sector of the market. If you have 9 models and 5 of them say to buy the same position or investment sector, your portfolio would be said to carry 55% overlap.(5/9) Overlap can be good if that sector is doing well, but most investors cannot take the risk associated with a 50% exposure to one sector. Therefore, Advisors are educated to monitor and manage overlapping positions by either omitting new trades into that sector or replacing an investment that may or may not be related to that specific investment sector.

Peer Groups - Other investments in the same category or sector. Often multiple investments are offered with similar business strategy or general industry affiliation. We measure Peer Groups to help find the best performing investment in a given sector.

Performance History - The results of investment activities over a given period of time. Often investment performance is quoted by 1, 3, 5, 10 year increments and/or since inception. Our models typically need a 5 year track record of price history to be able to qualify for model inclusion. However, some investments warrant inclusion without a 5 year track record history.

Portfolio - A group of models that have been characteristically evaluated and matched together in combination in groups of 3 to 11 models. Portfolios help to diversify account holdings across the best position of each individual model signal. Therefore, if 10 models are running with an account value of One Million Dollars, each model would likely contain $100,000 per model. Weightings of actual dollar values can differ per Advisors review and recommendation.

Risk Assessment - The monitoring of various risk factors in an investment portfolio to help determine that there are no unwanted or unintended risks in the portfolio that could cause performance surprises.

Top-Down - An investment strategy which first finds the best sectors or industries to invest in, and then searches for the best companies within those sectors or industries. This investing strategy begins with a look at the overall economic picture and then narrows it down to sectors, industries and companies that are expected to perform well. Analysis of the fundamentals of a given security is the final step.

Trade Limitations - Many investment companies have placed restrictions on trading activity. We work with those companies to understand what their restrictions are so that we can construct investment models that adhere to their internal policies. Many mutual funds have 60 to 90 day holding periods and variable annuity companies often limit accounts to 12 to 20 trades per year. This information allows us to determine if the platform is flexible enough to accommodate models. Often, this means annuities can only accommodate 4 or 5 models trading 4 times per year. You may want to discuss your specific trading restrictions with your Advisor.

Volatility - The relative rate at which the price of a security moves up and down. Volatility is found by calculating the annualized standard deviation of daily change in price. If the price of a stock moves up and down rapidly over short time periods, it has high volatility. If the price almost never changes, it has low volatility.

Why 9 or 11? - Nine to eleven models is significant due to the trading experiences that Scofield & Company, LLC has evaluated from past market cycles. First, diversification plays a key role in helping to spread investment related risk across many investment categories. When using 9 or 11 models you could expect to have between 3 and 11 different categories at once. When using fewer models, you could expect to see a higher percentage of concentration depending on the models investments from which it can select. If one position has significant negative performance the other positions may help to act as a diversified support to that one position. Finally, the odd number of models seems to help break a tie when the market has two positions that look equally as strong. By having an odd number from which to choose, the final portfolio composition of models will have at least one position that is gravitating to strength.